The restaurant IPO dam is apparently breaking.
Sweetgreen, the urban-centric fast-casual chain, is the latest restaurant company reportedly eyeing the public equity markets. That brings to four the number of restaurant companies that have either filed or are considering an initial public offering. And that doesn’t count Landry’s, which is merging with a blank-check company.
IPOs have been remarkably popular this year—179 of them have been filed this year already, according to Renaissance Capital, up 281% from last year. But much of that activity has been among special purpose acquisition companies, or SPACs, that take money from public investors and use it to buy private companies, thereby taking them public without a traditional IPO.
There has been just one traditional restaurant company IPO since 2015—Kura Sushi in 2019—yet strong stock performance by restaurant companies coupled with private equity investors sensing opportunity appears to be changing that.
Here’s a look at the companies that have filed or are reportedly considering such a step, along with some speculation at other potential offerings.
Sweetgreen
Bloomberg reported earlier this week that the salad chain is working with Goldman Sachs on a potential IPO—the company did not respond to a request for comment and Goldman declined comment on the report.
Sweetgreen has long seemed destined for this event and its valuation was soaring before the pandemic—investments in 2019 put its reported valuation at $1.6 billion, for instance. That’s a shocking valuation for a chain that had just 119 locations at the end of 2020.
The past year has not necessarily been kind to the chain—average unit volumes declined 10%. Yet the industry is recovering, the chain has a new investor-slash-ambassador in Naomi Osaka and is eyeing the suburbs for development, all important attributes for any concept that wants to sell stock to investors.
Krispy Kreme
The doughnut chain is the lone concept on this list that has already filed, and it was a surprising one. European investment firm JAB Holding took the chain private in 2016 and appeared to have long-term aspirations. Instead, it appears to be taking some of its holdings public following the European IPO of coffee company JDE Peets last year.
But the doughnut chain has done well outside the glare of being a public company. Unit count is up 29% since the go-private deal, unit volumes are up 33% and global system sales are nearing $1 billion.
And the market is apparently ripe for new restaurant offerings. So this could be a good time for Krispy Kreme to take on Wall Street again.
Torchy’s Tacos
The fast-casual taco chain was the first one this year to be outed as a potential IPO candidate when Bloomberg reported its thinking back in March. But Torchy’s appears to be a strong candidate for an offering so long as it can keep up its growth.
The chain’s system sales rose 7% last year, according to Technomic, despite the pandemic. It managed to open 11 new locations and finished 2020 with 83 locations. Those locations generate high volumes--$3.8 million per location in 2020 despite the pandemic.
What’s more, its CEO is GJ Hart, the former chief executive of Texas Roadhouse who has brought some of the strategies that helped that chain succeed over to Torchy’s.
Dutch Bros Coffee
The drive-thru coffee chain is apparently considering an offering, also according to Bloomberg, and a representative didn’t actually deny it—noting there are “several ways” that a private equity firm can exit its investment.
Yet Dutch is an intriguing name on the list. Drive-thru coffee has quietly been a huge trend in the industry and it has been on the leading edge. The chain now operates more than 400 locations and generated system sales growth even as other coffee chains saw declines—and the company has yet to fully pull the technology lever.
Who else?
Don’t forget Landry’s, which is still on pace to go public through a merger with Fast Acquisition Corp., the SPAC. Several other of the shell companies are looking at restaurants and it’s certainly possible that one could craft a deal with a restaurant, including one of those listed above. Indeed, it would be wholly unsurprising if one of the above companies does a SPAC deal rather than a traditional IPO.
But certainly plenty of companies could be potential IPO candidates—perhaps Inspire Brands, which has been rather acquisitive over the past few years and would seem to be a great public company candidate. And JAB’s holdings—which include companies like Panera Bread and the coffee-bagel operations including Caribou, Bruegger’s and Einstein Bros—could be game if the company is indeed looking to take its companies public.